Prudence
Prudence comes from
the Latin "prudentia," meaning foresight and sagacity; in Old French,
"prudence" means wisdom to see what is virtuous, suitable, and
profitable. Prudence is knowing when to hold them and when to fold them. In
working with leaders, prudence applies in at least three areas: wisdom,
insight/foresight and knowledge.
·
Wisdom clearly affects decision-making. Do we look at what is
working (bright spots) or only at what is not working? What do we focus on
first - strengths and passions or weaknesses? Do we truly care and manage our
people like we do our other “resources”? Do we have a shared and aligned sense
of purpose and goals? Is our decision-making process understandable and
grounded?
·
Insight/foresight requires balancing competing interests,
like the short and long term. Are we willing to make some sacrifices today for
a better, even great, tomorrow? Can we quickly assess the situation and
understand potential outcomes, not just outputs? Are we able to mitigate
risk as well as plan for rescue? Do we apply our lessons from the past without
imposing them on the future?
·
Knowledge ties to how we learn and apply. Do we test our
hypotheses (assumptions), learn, apply and iterate? Can we unlearn? Do we give
our people the education and experiences they need? Can we shift our lens, look
at things differently and reframe opportunities and challenges? Are we capable
of paradoxical thinking?
Below is a list of financially prudent habits
that should be adopted to ensure financial stability:-
Create a monthly budget: Live within your means by
creating a budget at the beginning of every month. Stick to this budget and
avoid overspending on unnecessary items. From whatever amount you take home
each month, save at least one-third of your monthly take-home salary. To ensure
that you do not overspend, practice self-control and ponder if you really need
to buy that expensive phone or the latest party dresses.
Make buying decisions on the VALUE you get: If you are planning to
buy a house or a car or a motorcycle, your decision should be based on the
value you get for the same over its entire lifecycle. It is ideal to plan the
amount you are comfortable spending on the purchase and then look for options
that fit into your budget. When making a buying decision, do take into account
the residual value that you will get when you sell the house or vehicle. Opt for
an asset that gives a higher residual value. This allows you to enjoy the asset
and get a healthy return when you decide to dispose of it.
Automated monthly transfer to a dedicated
savings/ contingency account: This is the real trick behind saving. Set a
particular amount aside and opt for automated transfer that will help you save
for your big buy or for your next holiday or simply for retirement. Whenever
you begin to earn, this is the first step towards forced saving. A contingency
account helps you when there is an emergency or a sudden need for money. This
way, you will not have to ask your family or friends for help.
Avoiding impulse purchases: Do not indulge in an
impulsive buy or try to curb extravagant habits as much as possible. Compare
products from different shops and see what they have to offer. Also, do not
think that buying in bulk is buying cheaper. You might be lured by the various
offers by different supermarkets that tend to motivate you towards bulk buying.
Impulse purchases will leave you regretting it in a couple of days when you see
better offers and the same product available at a cheaper rate.
Not missing monthly credit card payments: If you are using a credit
card for your purchases, one of the most important tasks is to not miss out on
the monthly credit card payments. In the case of credit cards, it is important
to remain punctual and maintain a positive credit score. To be financially
prudent is to be aware of the payments you are expected to make during the
coming month and to do it on time.
Planning for the long term: Financial planning means
planning for the long term. Be it for a month, year or for your long-term
goals. Set aside certain financial goals for the long term and plan for the
same. Maintain a budget and set aside a particular amount to achieve the
financial goal. Planning for the long term should begin now. You will have to
work towards your goals and save and spend accordingly.
Take advantage of festive offers/ seasonal
discounts: When
purchasing daily necessities or for big buys, the ideal thing is to wait for
festive offers and make the most of them. Festival offers usually help you
purchase at a cheaper rate. For instance, the Hari Raya festivity offers huge
discounts on every product. You can make the most of your purchase and save
from the budgeted amount as well. Scout through different shops or online
shopping websites to find the best deals and offers available for your
purchase. It is ideal to wait for an offer than to make an impulsive purchase.
Undertake periodic maintenance to avoid higher
bills at a later stage: What you neglect now, will ask for your attention at a
later stage. Financially prudent individuals never neglect periodic maintenance
requirements as and when they arise. If you neglect it now, it will pile up and
hit you harder at a later stage. Periodic maintenance should be taken care of
on time. This will save you from a large amount of spending in a couple of
years.
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